Question 1

Use of real GDP to measure changes in national output from one period to another can be misleading if

Accepted Answer

A) the price level is different for the two periods. 
B) the share of production carried out in the nonmarket sector is different for the two periods. 
C) the bundle of goods produced during the periods is quite similar. 
D) the size of the export-import sector differs for the two periods. 
A) the price level is different for the two periods. 
B) the share of production carried out in the nonmarket sector is different for the two periods. 
C) the bundle of goods produced during the periods is quite similar. 
D) the size of the export-import sector differs for the two periods.

Question 2

An American-owned McDonald's opens in Russia.How would the net revenue earned by this restaurant affect the GDP and GNP of the United States?

Accepted Answer

A) It would increase GNP and GDP. 
B) It would increase GNP and leave GDP unchanged. 
C) It would increase GDP and leave GNP unchanged. 
D) It would leave both GDP and GNP unchanged. 
A) It would increase GNP and GDP. 
B) It would increase GNP and leave GDP unchanged. 
C) It would increase GDP and leave GNP unchanged. 
D) It would leave both GDP and GNP unchanged.

Question 3

Which of the following would be included in this year's GDP?

Accepted Answer

A) the value of a used car,at its sale price 
B) the value of a new domestic automobile,at its sale price 
C) a sale of Microsoft stock from one individual to another 
D) the face value of a life insurance policy paid to a woman at the death of her husband 
A) the value of a used car,at its sale price 
B) the value of a new domestic automobile,at its sale price 
C) a sale of Microsoft stock from one individual to another 
D) the face value of a life insurance policy paid to a woman at the death of her husband

Question 4

Suppose the consumer price index (CPI)for Year X is 130.This means the average price of goods and services is

Accepted Answer

A) currently $130. 
B) 130 percent more in Year X than in the base year. 
C) 130 percent more in the base year than in Year X. 
D) priced at 30 percent more in Year X than in the base year. 
A) currently $130. 
B) 130 percent more in Year X than in the base year. 
C) 130 percent more in the base year than in Year X. 
D) priced at 30 percent more in Year X than in the base year.

Question 5

If ten years ago the price of a movie ticket was $5 and the average hourly wage was $10,and today the price of a movie ticket is $8 and the average hourly wage is $20,then

Accepted Answer

A) movies are now relatively cheaper in terms of work hours. 
B) movies are now relatively more expensive in terms of work hours. 
C) the relative price of movies has remained constant. 
D) workers now need to work longer hours to earn one movie ticket. 
A) movies are now relatively cheaper in terms of work hours. 
B) movies are now relatively more expensive in terms of work hours. 
C) the relative price of movies has remained constant. 
D) workers now need to work longer hours to earn one movie ticket.

Question 6

Which statement represents most correctly the relationship between nominal GDP and real GDP?

Accepted Answer

A) Nominal GDP measures base-year production using base-year prices,whereas real GDP measures current production using current prices. 
B) Nominal GDP measures current production using base-year prices,whereas real GDP measures current production using current prices. 
C) Nominal GDP measures current production using current prices,whereas real GDP measures current production using base-year prices. 
D) Nominal GDP measures current production using current prices,whereas real GDP measures base-year production using base-year prices. 
A) Nominal GDP measures base-year production using base-year prices,whereas real GDP measures current production using current prices. 
B) Nominal GDP measures current production using base-year prices,whereas real GDP measures current production using current prices. 
C) Nominal GDP measures current production using current prices,whereas real GDP measures current production using base-year prices. 
D) Nominal GDP measures current production using current prices,whereas real GDP measures base-year production using base-year prices.

Question 7

When the quality of a good improves,the purchasing power of the dollar

Accepted Answer

A) increases,so the CPI overstates the change in the cost of living if the quality change is not accounted for. 
B) increases,so the CPI understates the change in the cost of living if the quality change is not accounted for. 
C) decreases,so the CPI overstates the change in the cost of living if the quality change is not accounted for. 
D) decreases,so the CPI understates the change in the cost of living if the quality change is not accounted for. 
A) increases,so the CPI overstates the change in the cost of living if the quality change is not accounted for. 
B) increases,so the CPI understates the change in the cost of living if the quality change is not accounted for. 
C) decreases,so the CPI overstates the change in the cost of living if the quality change is not accounted for. 
D) decreases,so the CPI understates the change in the cost of living if the quality change is not accounted for.

Question 8

An increase in the Consumer Price Index indicates that

Accepted Answer

A) the real income of households is increasing. 
B) the purchasing power of the dollar is increasing. 
C) the cost of buying the typical bundle of goods consumed by households is increasing. 
D) the real net worth of consumers is increasing. 
A) the real income of households is increasing. 
B) the purchasing power of the dollar is increasing. 
C) the cost of buying the typical bundle of goods consumed by households is increasing. 
D) the real net worth of consumers is increasing.

Question 9

Assume that between 1999 and 2009 nominal GDP increased from $7 trillion to $12 trillion and that the GDP deflator rose from 100 to 150.Which of the following expresses GDP for 2009 in terms of 1999 prices?

Accepted Answer

A) $7.5 trillion 
B) $8.0 trillion 
C) $9.0 trillion 
D) $18.0 trillion 
A) $7.5 trillion 
B) $8.0 trillion 
C) $9.0 trillion 
D) $18.0 trillion

Question 10

Which of the following accurately indicates how the recent outbreaks of terrorism have influenced the GDP of western nations?

Accepted Answer

A) Additional expenditures on security designed to protect individuals from terrorist attacks are subtracted from GDP. 
B) Additional expenditures on security designed to protect individuals from terrorist attacks are added to GDP as part of output. 
C) Since expenditures on the prevention of terrorism do not contribute to the well-being of individuals,they exert no impact on GDP. 
D) Since terrorism is merely a redistribution of output,expenditures on the prevention of terrorism do not contribute to GDP. 
A) Additional expenditures on security designed to protect individuals from terrorist attacks are subtracted from GDP. 
B) Additional expenditures on security designed to protect individuals from terrorist attacks are added to GDP as part of output. 
C) Since expenditures on the prevention of terrorism do not contribute to the well-being of individuals,they exert no impact on GDP. 
D) Since terrorism is merely a redistribution of output,expenditures on the prevention of terrorism do not contribute to GDP.

Question 11

General Motors Corporation (a U.S.-based firm)produces a Saab vehicle in Sweden,and sells it in the United States.In which country's GDP is it included?

Accepted Answer

A) Sweden and the United States 
B) The United States because it was sold there 
C) The United States because GM is a U.S.company 
D) Sweden because it was produced there 
A) Sweden and the United States 
B) The United States because it was sold there 
C) The United States because GM is a U.S.company 
D) Sweden because it was produced there

Question 12

What is meant by a final good or service as opposed to an intermediate good or service? Why are only final goods and services included in the calculation of GDP?

Accepted Answer

A final good is a good purchased by its

Question 13

Which of the following would be included as a government purchase in the national income accounts?

Accepted Answer

A) the government's interest payments on the national debt 
B) the purchase of baggage screening machines by the FBI 
C) unemployment insurance payments 
D) the Social Security tax revenues minus Social Security benefits paid to the elderly 
A) the government's interest payments on the national debt 
B) the purchase of baggage screening machines by the FBI 
C) unemployment insurance payments 
D) the Social Security tax revenues minus Social Security benefits paid to the elderly

Question 14

If the underground economy is sizable,then GDP will

Accepted Answer

A) understate the economy's performance. 
B) overstate the economy's performance. 
C) fluctuate unpredictably. 
D) accurately reflect this subterranean activity. 
A) understate the economy's performance. 
B) overstate the economy's performance. 
C) fluctuate unpredictably. 
D) accurately reflect this subterranean activity.

Question 15

A business produced $10 million of goods in 2010 but sold only $9 million.Is the $1 million increase in inventory counted as part of the 2010 gross domestic product?

Accepted Answer

A) No,because inventories are intermediate goods. 
B) No,because if these inventories were sold in 2011,they would be counted twice. 
C) Yes,because these inventories are part of the output of the economy in 2010. 
D) Yes,but they will be added to the 2010 GDP only if they are sold in 2011. 
A) No,because inventories are intermediate goods. 
B) No,because if these inventories were sold in 2011,they would be counted twice. 
C) Yes,because these inventories are part of the output of the economy in 2010. 
D) Yes,but they will be added to the 2010 GDP only if they are sold in 2011.

Question 16

Assume that between 2000 and 2010 the money GDP of an economy increased from $3 trillion to $8 trillion and that the appropriate index of prices increased from 100 to 200.Which of the following expresses GDP for 2000 in terms of 2010 prices?

Accepted Answer

A) $1 trillion 
B) $3 trillion 
C) $4 trillion 
D) $6 trillion 
A) $1 trillion 
B) $3 trillion 
C) $4 trillion 
D) $6 trillion

Question 17

Suppose we shopped for a basket of goods in Year 1 and it cost $350.Suppose the same basket of goods costs $420 in Year 2.If the CPI in Year 1 is 100,the CPI in Year 2 will be

Accepted Answer

A) 70. 
B) 80. 
C) 110. 
D) 120. 
E) 170. 
A) 70. 
B) 80. 
C) 110. 
D) 120. 
E) 170.

Question 18

Use the table below to answer the following question(s).
Table 7-5
  
-Refer to Table 7-5.Gross national product equals

Accepted Answer

A) $1,860. 
B) $1,910. 
C) $1,380. 
D) $4,170. 
A) $1,860. 
B) $1,910. 
C) $1,380. 
D) $4,170.

Question 19

The GDP deflator is designed to adjust nominal GDP

Accepted Answer

A) for changes in the unemployment rate. 
B) for changes in prices. 
C) for problems that arise because of externalities. 
D) for changes in interest rates. 
A) for changes in the unemployment rate. 
B) for changes in prices. 
C) for problems that arise because of externalities. 
D) for changes in interest rates.

Question 20

If an economy's capital stock is greater at the end of the year than at the beginning of the year,over this period,

Accepted Answer

A) net investment has been positive. 
B) depreciation has exceeded net investment. 
C) depreciation has exceeded gross investment. 
D) net investment has exceeded gross investment. 
A) net investment has been positive. 
B) depreciation has exceeded net investment. 
C) depreciation has exceeded gross investment. 
D) net investment has exceeded gross investment.

Exam 7: Ataking the Nations Economic Pulse

Use of real GDP to measure changes in national output from one period to another can be misleading if

An American-owned McDonald's opens in Russia.How would the net revenue earned by this restaurant affect the GDP and GNP of the United States?

Which of the following would be included in this year's GDP?

Suppose the consumer price index (CPI)for Year X is 130.This means the average price of goods and services is

If ten years ago the price of a movie ticket was $5 and the average hourly wage was $10,and today the price of a movie ticket is $8 and the average hourly wage is $20,then

Which statement represents most correctly the relationship between nominal GDP and real GDP?

When the quality of a good improves,the purchasing power of the dollar

An increase in the Consumer Price Index indicates that

Assume that between 1999 and 2009 nominal GDP increased from $7 trillion to $12 trillion and that the GDP deflator rose from 100 to 150.Which of the following expresses GDP for 2009 in terms of 1999 prices?

Which of the following accurately indicates how the recent outbreaks of terrorism have influenced the GDP of western nations?

General Motors Corporation (a U.S.-based firm)produces a Saab vehicle in Sweden,and sells it in the United States.In which country's GDP is it included?

What is meant by a final good or service as opposed to an intermediate good or service? Why are only final goods and services included in the calculation of GDP?

Which of the following would be included as a government purchase in the national income accounts?

If the underground economy is sizable,then GDP will

A business produced $10 million of goods in 2010 but sold only $9 million.Is the $1 million increase in inventory counted as part of the 2010 gross domestic product?

Assume that between 2000 and 2010 the money GDP of an economy increased from $3 trillion to $8 trillion and that the appropriate index of prices increased from 100 to 200.Which of the following expresses GDP for 2000 in terms of 2010 prices?

Suppose we shopped for a basket of goods in Year 1 and it cost $350.Suppose the same basket of goods costs $420 in Year 2.If the CPI in Year 1 is 100,the CPI in Year 2 will be

Use the table below to answer the following question(s). Table 7-5 -Refer to Table 7-5.Gross national product equals

The GDP deflator is designed to adjust nominal GDP

If an economy's capital stock is greater at the end of the year than at the beginning of the year,over this period,

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